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Walmart bribery probe finds no major misconduct in Mexico

The Department of Justice has almost finished its bribery probe into Walmart’s Mexican unit and has found no solid grounds in the way of major offenses, and is likely to result in a much smaller case than investigators first expected the Wall Street Journal reports. The federal probe of allegations against Walmart’s Mexican operations, which took almost three years, is far from over, but it is possible the case could be resolved with a fine and no criminal charges against individual company executives. A spokesman for Walmart Greg Hitt said the company was cooperating with the government on the matter. A Justice Department spokesman declined to comment on the status of the investigation.

As part of the same investigation, investigators found evidence of Walmart allegedly paying thousands of small bribes to Indian officials to get customs clearance and obtain real-estate permits, according to Wall Street reports. Vast majority of payments were below $200 (about ₹ 13,000 at current exchange rate) and some were as low as $5 (₹ 330) but together totaled millions of dollars. Walmart entered Indian market in 2007 through a supermarket joint venture with Bharti Enterprises but split up in 2013. Since then, it is mostly focused on wholesale business. Wall Street Journal said investigators found similar payments in Mexico, but “the bulk of such activity seemed to be in India”.

Walmart is likely to face charges of violating the U.S. Foreign Corrupt Practices Act (FCPA) due to these payments, the paper said, adding that the charges in India are unlikely to amount to a large fine as FCPA penalties are connected to profits the alleged misconduct generated.

“Because penalties under the FCPA are often connected to the amount of profit the alleged misconduct generated, the payments in India wouldn’t be likely to result in any sizable penalty, since Walmart’s operations there haven’t been particularly profitable,” said the people familiar with the matter.

The world’s largest retailer found itself embroiled in controversy three years ago after New York Times published an investigative piece alleging Walmart bribery in its Mexican subsidiary and a cover-up in its Bentonville, Arkansas, global headquarters. The allegations went back to 2005, when a former Wal-Mart de Mexico executive allegedly e-mailed one of the company’s senior lawyers, detailing how the world’s largest retailer had paid more than $24 million in bribes to obtain permits in virtually every corner of the country. About one-fifth of Walmart’s 11,500 stores are in Mexico.

In November 2011, Walmart disclosed possible violations in Mexico to the U.S. Justice Department and Securities and Exchange Commission. Within days, they unearthed evidence of widespread bribery. They also found documents showing that Wal-Mart de Mexico’s top level executives not only knew about the payments, but had taken steps to conceal them from Walmart’s headquarters in Bentonville, Ark. Wal-Mart de Mexico was the company’s brightest success story, pitched to investors as a model for future growth. Now stained with one of the biggest bribery scandals in U.S. history, Walmart, in addition to the $24 million in alleged bribes, has made $16 million in donations to Mexican local governments as late as 2005.

The bribery probe, which was preceded by an internal Walmart investigation that began a year earlier, has cost the retailer $650 million so far and led the chastened company to repeatedly say compliance with anti-corruption laws is a top priority. That makes its one of the most expensive probes in U.S. history. The Department of Justice and the SEC have stepped up their efforts to enforce the FCPA in recent years. In the largest such case to date, Siemens AG, Europe’s largest engineering company, agreed to pay $800 million to the U.S. authorities in 2008 to resolve charges that it paid over $800 million in bribes to win contracts around the world. Siemens also spent $1bn on lawyers and accountants and its internal controls. 

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